With the launch of the Lee Jae-myung administration, the domestic real estate market is expected to undergo significant policy changes. President Lee Jae-myung pledged to expand housing supply centered on public dwellings and redevelop old urban areas, including the revitalization of first-generation new towns. However, he did not specify specific targets or methods for the scale of the supply expansion.
Experts suggest that the new government should quickly present a concrete blueprint for housing supply to quell market anxieties. There are also opinions that the policy should focus on actual housing demanders by providing benefits such as easing loan regulations to them. It is necessary to apply relaxed regulations to actual demanders rather than broadly applying loan regulations to everyone.
In addition, there are many opinions that a differentiated approach to the real estate markets in the metropolitan area, such as Seoul and Gyeonggi Province, and in local areas is needed. Expanding infrastructure for the recovery of local real estate markets has been identified as an urgent task for the new government.
◆ Need to ease loan regulations centered on actual demanders; tax reduction for first-time buyers is necessary
Easing loan regulations focused on actual demanders is one of the main policy tasks identified by experts for the Lee Jae-myung administration. Next month, the implementation of a three-tier stress total debt service ratio (DSR) regulation aimed at reducing household loan limits primarily for metropolitan housing mortgage loans means that this must prevent the market recession. The government will implement a three-tier DSR that adds a stress rate of 1.5% (0.75% for local housing mortgages) on housing mortgages, credit loans, and other loans from banks and second-tier financial institutions starting in July.
Yang Ji-young, head of asset management consulting at Shinhan Investment Corp., noted, "The three-tier stress DSR will further shrink the borrowing capacity of actual demanders, raising concerns that even the mid-to-low priced market may become depressed," adding, "The government's loan regulations should be eased to focus on actual demanders to prevent market shrinkage." He said, "Rather than fully expanding the DSR, it is necessary to establish flexible criteria that apply differentials based on income levels and regions."
There were also many opinions that the government should consider tax reductions focusing on actual demanders and areas with many unsold dwellings during the reform of the real estate tax system.
Kim Hak-ryul, director of Smartube Real Estate Research Institute, emphasized the need to consider actual demanders. He stated, "Changes in the real estate tax system over the past few years have lacked predictability and lost public trust," noting, "The new government must design the real estate tax system in a way that restores tax justice while reducing the burden on actual demanders."
He added, "The easing of the comprehensive real estate tax for one household and one dwelling, the reduction of acquisition taxes for first-time home buyers, and the easing of capital gains taxes for long-term homeowners must reduce the burden on the middle class and actual demanders, while continuous strict taxation on multiple housing owners for speculative purposes should prevent overheating in the market."
Kim In-man, director of Kim In-man Real Estate Research Institute, also stated, "We should consider exempting acquisition taxes for the purchase of unsold dwellings in local areas for at least a year, as well as exemption from capital gains taxes for five years and property tax reductions." Earlier, the government revised the local tax law from last year to exclude locally unsold apartments from the number of dwellings when they are first acquired to reduce acquisition taxes. This makes use of the fact that acquisition tax rates differ based on the number of dwellings per household. This measure will be in effect until December 31.
◆ "To revive local demand, we must improve infrastructure first"
There are also many opinions that improving infrastructure is necessary to recover the local real estate market and construction economy. Park Won-gap, chief real estate expert at KB Kookmin Bank, stated, "It's difficult to resolve real estate issues solely through real estate itself," as the external environment of land, schools, hospitals, and jobs reflects complexly.
Mr. Park stated, "There must be special measures to revitalize the local economy so that young people can find jobs and live in the area for the local real estate market to recover."
Kim In-man, director of Kim In-man Real Estate Research Institute, also stated, "To strengthen local competitiveness, we need to create quality jobs through substantial incentives and make daring investments in local national universities," adding, "Ultimately, the key is to improve infrastructure to prevent the flow of people and money from the local areas to Seoul and the metropolitan area."
Yang Ji-young also mentioned, "Rather than large-scale land development projects with a low potential for demand inflow, improving conditions for attracting regional universities and corporations and enhancing transportation infrastructure must come first."
◆ Seoul-led housing price increase is expected to persist for the time being
Meanwhile, many forecasts suggest that the upward trend in housing prices centered around Seoul will continue for the time being even after the launch of the Lee Jae-myung administration. Ham Young-jin, head of real estate research at Woori Bank, forecasted, "The housing market is likely to continue its trend led by Seoul, with a rise of over 1% this year."
Ham added, "With the Gangnam area and Yongsan precinct, which were driving the rise in housing prices, now regulated as land transaction permit zones, demand for gap investments and 'FOMO' (fear of missing out) buying before prices rise will likely decrease for a while, but prices will not fall."
You Seon-jong, a professor at Konkuk University’s Department of Real Estate Studies, also stated, "The number of permits in the metropolitan area has been significantly low over the last five years," adding, "There are concerns that housing prices may rise in the future." He pointed out that "in local areas, there is oversupply compared to demand, while Seoul faces excessive demand compared to supply, leading to a mismatch between supply and demand," emphasizing, "The new government must prepare to supply housing in the metropolitan area centered on Seoul, where supply is lacking."
Commissioner Park Won-gap stated, "The anxiety that housing supply may be insufficient is at the core of the current housing market instability," urging, "The new government should further refine its supply plans and present a blueprint." He emphasized, "Also, execution and speed rather than planning are crucial for stabilizing the market," stating that the signal must be sent clearly to the housingless and the market that waiting for the government's supply policy will allow them to purchase homes at a lower price.